In Torchlight 1, it was merely a "ranking" of sorts. Additionally, each time you increased it, you got another skill point. I'd think it'd be something similar in TL2.
–
Raven Dreamer♦Sep 25 '12 at 19:43

4 Answers
4

Fame is, like your experience, a statistic you acquire as you play. While you only get experience from killing regular enemies, killing champions (purple health bars) bosses (orange health bars) and completing quests will also grant you some fame.

When you get enough fame to level it up, you gain 1 additional skill point. There are 32 fame levels.

I thought I was close to the top of the fame level at Local Hero, turned out it was only 12 on the list of 34.
Here they are listed below in order of starting fame level.
And yes each level up in fame you get an additional skill point.